Nigerian Banks Surge Towards Capital Compliance, Easing Fears of Consolidation – Fitch

The Nigerian banking sector is making remarkable progress in raising core capital to meet the new paid-in capital requirements set by the Central Bank of Nigeria (CBN), Fitch Ratings reports. With the third-quarter 2026 deadline in sight, most banks are on track, reducing the likelihood of widespread mergers and acquisitions (M&A) in the sector.

The capital-raising drive is helping banks recover from the adverse effects of naira devaluation, bolstering their capital positions and enabling business expansion. Strong investor confidence has fueled successful fundraising efforts, ensuring that first- and second-tier banks can meet the new capital benchmarks primarily through fresh equity injections.

Breaking Down the Progress

In March 2024, the CBN mandated higher paid-in capital requirements—comprising share capital and share premium—for commercial, merchant, and non-interest banks. Financial institutions were given three options for compliance: direct equity injections, mergers & acquisitions, or downgrading their licence authorisation.

Fitch noted that major banks have made significant strides:

• Access Holdings and Zenith Bank have fully met the ₦500 billion capital requirement for an international licence.
• First HoldCo, United Bank for Africa (UBA), and Guaranty Trust Holding Company (GTCO) are raising capital in phases, securing shareholder approvals for further fundraising rounds.
• Fidelity Bank and FCMB Group have begun raising funds but will need additional capital to retain their international licences. Their options include further capital raising or downgrading to national licences.
• Ecobank Nigeria and Jaiz Bank required minimal injections and have already achieved compliance. However, Fitch estimates that Ecobank still falls short of the 10% total capital adequacy ratio (CAR) requirement and plans to raise more funds.
• Stanbic IBTC Holdings has launched a rights issue to maintain its national banking licence.

What This Means for the Banking Sector

Fitch’s analysis indicates that the risk of banking sector consolidation has diminished, as most banks are successfully securing capital independently. However, third-tier banks and slower-moving institutions such as Union Bank of Nigeria (UBN) face uncertainties, particularly regarding their ability to secure regulatory approvals.

• Wema Bank has received shareholder approval to raise capital for its national licence, with plans to launch fundraising efforts in April.
• Coronation Merchant Bank has secured board approval for its capital-raising strategy.
• UBN and some unrated third-tier banks may resort to M&A or licence downgrades if they struggle to meet requirements.

Reflections on the Capital Drive

The ongoing capital injections are helping banks recover from the financial strain caused by naira depreciation, stabilizing capital adequacy ratios and mitigating foreign exchange risks. Strengthened capital buffers will provide resilience against regulatory interventions, currency volatility, and economic challenges while fueling business growth.

Despite these positive developments, Fitch does not expect the capital-raising efforts to trigger upgrades in long-term issuer default ratings (IDRs) for banks rated ‘B-’, given the constraints of Nigeria’s ‘B-’/positive long-term IDR. However, they could support outlook revisions to positive for some institutions. Notably, banks like UBN and Ecobank, currently rated ‘CCC’, could see rating upgrades if capital adequacy ratio compliance is restored.

At the national level, these capital raises are more likely to influence National Long-Term Ratings, which measure the creditworthiness of Nigerian banks relative to local peers.

A Look Ahead

The capital-raising wave signals a more robust financial sector, increasing investor confidence and reinforcing the resilience of Nigerian banks. While uncertainties remain for a few third-tier banks, the industry appears well-positioned to meet CBN’s requirements without a major wave of forced mergers. As banks strengthen their capital bases, they are better equipped to drive economic expansion, improve lending capabilities, and navigate future financial challenges.